Farmers could be in for a shock if proposals to change the CAP and make it more ‘results orientated’ are introduced.

Bold proposals put forward this week by Alan Matthews, Professor Emeritus of European Agricultural Policy in the Department of Economics at Trinity College, call for a CAP post 2020 that would see payments targeted on specific objectives with a clear results orientation.

Matthews told a workshop on the future of CAP in the European Parliament that “the current system of direct payments is neither effective, nor efficient, nor equitable and that it is a very poor use of taxpayers’ money.”

He said that if CAP funding is reduced in the coming period, it becomes even more important to focus spending on those areas which give the greatest value in return.

Matthews also proposes that all future CAP spending, and not only traditional Pillar 2 measures, should require co-financing by Member States.

Primary importance, he said, must go to ensuring that farmers are rewarded for practices that protect biodiversity and maintain ecosystem services and which go beyond good agricultural practice.

“We need to find ways to reward farmers and land managers who sequester soil carbon and thus contribute to mitigating climate change."

EU legislators have a responsibility to taxpayers as well as farmers, he said, and all farmers who benefit from any CAP payment should be obliged to observe cross-compliance standards.

He proposes that cross-compliance and greening would be replaced by a requirement to enrol in a shallow agri-environment scheme co-funded by the CAP – this is the proposal for ‘conditional greening’ that was briefly considered by the previous AGRI Committee.

Direct payments accounted for around 72pc of the CAP budget and for just less than 30pc of the EU budget in recent years. Matthews said that they are an important source of income on many farms and are therefore central to the debate on the future of the CAP.

However, he said recent reform of the CAP, where a 30pc share of direct payments went into a greening payment to farmers respecting certain agricultural practices beneficial for the climate and the environment, had not satisfied many stakeholders.

Matthews also outlined a number of possibilities for future CAP payments, including making technical adjustments to the last reform; following similar reforms to the US 2014 Farm Bill including converting some payments to support risk management tools; and one that has greater emphasis on greening or environmental measures.

However, Matthews his bolder proposal approach questioned whether the current system of direct payments is fit for purpose and that payments should be targeted on specific objectives with a clear results orientation.

Co-Funding of CAP Spend

“We need to think about how to incentivise Member States to make use of EU funds as ambitiously as possible and to ensure that value-for-money is given in return. Requiring national taxpayers to make a contribution is one way to ensure this.”

The co-financing rate can be adjusted to reflect the extent to which particular spending in a Member State has EU value added, he said.

Member states already spend almost €8 billion a year on state aids to agriculture. “The recent crisis aid packages also permitted, although they did not require, additional national expenditure, so this recommendation builds on already established precedents.”

Then, over time, decoupled area-based direct aids should be gradually phased out, he said.

“They were introduced to help farmers adjust to the reduction in administered support prices under the ‘old’ CAP. They are clearly an important element in farm income on many farms so this can only happen over time. There will be a need for transitional payments to smooth the impact of this decision.

“This will also allow time for the necessary adjustments in land rents and input costs which will play an important role in cushioning the impact on incomes. However, it is important to set the direction of travel so that young entrants and existing farmers making investment decisions have a clear idea of the future policy environment.”

Support for innovation and improved competitiveness, for strengthening producers’ role in the food chain, for young farmers, can all be justified, he said.

“Agricultural policy should focus on these issues directly rather than use these as rhetorical arguments to defend an outmoded system of uniform decoupled direct payments paid on every hectare of agricultural land.”